Pay level and the mix of pay forms

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In this video, learn how pay comparisons outside an organization influence decisions about how to pay and how much to pay in total compensation. Learn how tight versus loose labor markets; product or service markets; and organizational factors, such as size and employee preferences, help managers decide whether to lead, lag, or match the market.

- Always remember that the objectives of any compensationsystem are to attract, retain, and motivate talent.This is the arm concept.At the same time, every organization wants to control costsand increase revenues.When it comes to attracting and retaining talent,it's critical that your pay package is competitive.To do that, it's important to look at what competitorsare paying for the same skills.Then, you can choose whether to match what they're paying,or to design a package that differs from theirs,but better fits your business strategy.

At a broad level, it's important to look at three things.The first is the availability of qualified people,and the demand for that talent.The interaction of availability and demandproduces a going rate for a given job or skillset.The second is the profit margin of the productsor services you're selling.Over time, an organization must generate enough revenueto cover its expenses, including compensation.

So, an employers pay level is limited by its abilityto compete in the market.Take items like milk and eggs.The profit margins on them may beonly a few percentage points.Contrast that to items like luxury cars or jewelrywhere profit margins may be several hundred percent or more.Third, are the characteristics of your organization,including its size, and employee preferenceson issues such as health care, bonuses, or pensions.

Employers can then choose to lead, lag,or match the going rate.Employers choose to lead or pay more than the going ratewhen they want to attract top talent to key positions.They will match the going rate for jobsthat are not as directly tied to their success.For example, in a cutting edge tech company,software development engineers are critical.And so, the company may pay above the going rateto attract the most creative minds.

At the same time, entry level administrative support staffdo basic administrative functions,and so are paid the going rate.But when would an organization choose to lag behindor offer less than the going rate?Often, this happens in startup firmsthat don't have the cash flow to match the going rate.Instead, they offer long-term incentiveslike grants of company stock before they go public.If the company is able to go public,as a result of its success,its early hires can become wealthy overnight.

Think Google or Facebook.So, to attract, retain, and motivate talent,think carefully about the kinds of talent you need to hire,and your ability to pay that talent.It's about developing a labor budget and a pay structurethat will allow you to compete.

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Released

8/16/2017

To attract and retain top talent, it's crucial for companies to get compensation and benefits right. When employees feel that they're paid fairly for what they do, there's greater incentive for them to excel in the workplace. This course provides an overview of the strategic choices that employers must make when developing a total rewards system. HR expert Wayne Cascio addresses management, policy, and legal issues in developing pay structures, incentive plans, and benefit offerings. He discusses how to establish an effective performance review process, how pay surveys drive decisions about compensation and benefits, the role of HR technology, and more.

Topics include:

Explain the legal framework and requirements of compensation, benefits, including life and health insurance

Demonstrate how to establish pay structures

Describe three things to consider when identifying external competitiveness in compensation and benefits

Demonstrate how to build incentive plans and performance management systems

Identify and explain two methods of executive compensation

Explain and demonstrate how to approach internal compensation

Demonstrate how to build a competitive strategy and total compensation strategy